Weighing the Options of Refinancing

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Some have said that only when your new interest will be at least two points under your current rate, should you refinance your mortgage. Perhaps that was good advice a number of years ago, but since refinance costs have been getting lower, it may be time to look into it. Refinancing has a number of advantages that can make it worth the up-front expenditure many times over.

Advantages of Refinancing

When you refinance, you could have the ability to lower the interest rate and monthly mortgage payment amount, sometimes significantly. You could also have the option to "cash out" some of the built-up equity in your home, which you can use to consolidate debt, make home improvements, or take a vacation. You could be able to refinance into a shorter-term mortgage loan, enabling you to build your home equity faster.

Expenses and Fees

Of course, you'll have to pay for the process of refinancing. You will have the same types of expenses and fees as with your current mortgage. Included in the list may be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.

Do the Math

Paying points can help you get a lower interest rate. When you pay (on average) 3% of the mortgage loan amount up front, the savings for the life of the refinanced mortgage loan can be great. We recommend that you consult with a tax professional before acting on hear-say that these points paid may be deducted on your taxes.

Another thing about taxes is that if you lower your interest rate, it follows that you'll also be lowering the paid interest amount that you may deduct from your federal income taxes. This is another cost that borrowers take into account. Call us at 602-369-8482 to help you do the math.

All things considered, for most the amount of up-front costs to refinance will be paid back soon in monthly savings. We can help you explore what your options are, considering the effect a refinance may have on your taxes, whether you are likely to sell your home in the near future, and your money on hand. Call us at 602-369-8482 to get started.

Curious about refinancing your home? Give us a call at 602-369-8482.

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